Why Industrial Will See Multiple 1M SF Deals in 2015

E-commerce is poised to take the industrial market by storm with more than one-half of all retail sales projected to be done online as soon as 2020. (And Amazon declaring war on Etsy.) That's why we’re excited to host Bisnow’s 4th annual DFW Industrial Real Estate Summit on March 24 at the InterContinental Dallas starting at 7:30am.

DFW’s industrial market should see increased activity in the mega-deal space, largely because of that e-commerce boom, says Majestic Realty Co. VP Al Sorrels (with his son, Blake, at the NCAA national championship at AT&T Stadium). The potentially exponential growth will be among the biggest impacts to the industrial real estate business, he says. It will impact both developers and tenant reps because it is already changing the types, shapes and designs of buildings, as well as “how we look at deals, clear heights and associated factors,” he tells us. That growth is a trend that is here to stay, he says.

Majestic plans to start two more spec buildings (250k and 331k SF) in the next month or so at its 225-acre Majestic Airport Center DFW (off SH 121 in Lewisville). A 1M SF spec building (pictured) was completed there a few months ago, bringing current square footage in that park to 2.5M SF. Several deals for the 1M SF spec building are in the works, he says. Majestic is in the midst of dirt work on a 100-acre industrial park in Hutchins at I-20 and I-45 for a spec 250k SF building that should be done by year’s end.

Demand is strong for large corporate users, Al says. He’s seeing both relos and expansions, but relos are tipping the scale. “That’s what we like because there’s net absorption, rather than leaving an 800k space and taking 1M SF somewhere else,” he says. Al tells us Majestic focuses on spec projects because Dallas is a hyper-competitive market and most users want to touch and feel spaces before inking a deal, Al tells us. That’s why speculative projects start popping out of the ground when vacancy rates get low. Tenants want a ready-made solution and when you’re competing, if you have a building that’s up versus your competitor who is selling a proposed building on a land site where the tenant can’t come in and see and feel and touch things, you’ve got a big advantage.

Duke SVP Jeff Thornton (here, with his wife, Megan) tells us Duke leased 3M SF in 2014 and got two new buildings out of the ground and is capitalizing on that momentum into 2015 with enough inventory in its land bank to build 4.3M SF of new product. He teases that Duke inked a 1M SF lease, but won’t spill the beans on to whom or where until the Bisnow industrial event. Duke’s 15M SF DFW portfolio is just below 98% occupied (the overall DFW industrial market is just below 93% leased). For DFW, 7% vacancy is a historic low. There’s about 25M SF of spec industrial space already delivered or coming on line in 2015, and Jeff believes the current deal activity in the market will take a good bite out of the new inventory.

Jeff tells us 2014 was a year full of "bread and butter" deals with only one 1M SF and a handful of 500k SF or larger deals inked. This year should see about a half-dozen difference-making deals on the larger end of the spectrum with 2015 being a good year for absorption. There may not be as many mega-deals as 2013, but the law of averages will catch up locally, he says. Join us for Bisnow’s 4th annual DFW Industrial Real Estate Summit on March 24 at the InterContinental Dallas starting at 7:30am. (Register here.)